What consumers like in co-branded cards

August 29, 2024 12:48 PM

While co-branded cards are a big opportunity, the relationships between the card issuers and retailers can be tricky.

Payment analysts and other experts recently told American Banker that it's vital to have the resources ready to serve customers, since any attrition due to a bad experience can cause problems for the corporate partnership.

Consumers are drawn to reliable customer service, easy onboarding and the ability to earn rewards quickly, according to J.D. Power, which earlier in August released customer satisfaction ratings for some of the market's largest co-branded cards.

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The research company in June and July polled about 39,000 consumers about account management, benefits, customer service, rewards earning, rewards redemption and terms.

"Customer experience is significantly important for co-brand card customers," said John Cabell, director of payments intelligence at J.D. Power, in an email. "These cards have all the same experience drivers as bank brand cards...however, these co-brand cards have significant other components of satisfaction linked with the cobrand partner that involve the airline or retail partner experience."

Here are some of its results.

Southwest Rapid Rewards Premier Card

The JPMorgan Chase-issued card earned a score of 658, tops among airline cards. The airline card recently updated its incentive, cutting the spending requirement for its points-driven bonus system. About 80% of U.S. consumers use airline-rewards programs, according to the American Economics Liberty project, making airline rewards a $68 billion business.

Delta SkyMiles Platinum

The airline's co-brand card with American Express scored 627 and ranked third in J.D. Power's list of airline cards. The card has been the subject of some controversy that demonstrates the importance of consumer input in the partnerships. In 2023, Delta changed its rewards policy to focus on money spent on the card rather than miles flown, a move that the airline partially reversed after customer pushback. In an earnings call in late 2023, Amex Chairman and CEO Steve Squeri said Delta's decision did not impact business.

AAdvantage Executive World Elite

American Airlines' top-tier Citigroup-issued co-branded card scored 619. Large airline cards have come under regulatory pressure recently, as the Consumer Financial Protection Bureau says the large carriers are making it more difficult for smaller airlines to compete, creating potential regulatory challenges in addition to stiff competition.

Apple Card

The relationship between Apple and Goldman Sachs has been marked by battles between the two corporate giants, with the bank blaming Apple for financial losses and Apple suggesting the partnership should be discontinued. But consumers are relatively satisfied with the card's user experience, scoring 654 in the J.D. Power survey. The partnership is designed to enable both Apple and Goldman Sachs to expand their product menus, using Apple Pay's enrollment strength as a pivot to cross-sell financial services to Apple consumers and Apple products to Goldman's customers.

Hilton Honors

The hotel chain's Amex card scored 644. Amex relies heavily on travel payments from its base of high-end card holders. These consumers have been largely immune from higher inflation and fears over a slow economy and have helped Amex post a series of earnings reports that have met or surpassed analyst expectations.

Costco

Amex's earnings suffered when it lost the Costco co-branded partnership in 2015. The partnership has worked for Citigroup in terms of customer satisfaction, with a 634 score from J.D. Power. The loss of the Amex deal created an opportunity for Citigroup, which has expanded its incentive marketing program in recent years to include more retail categories. That includes spending on everyday items, fitting with Costco's business model.

Amazon

Amazon's Prime Rewards Signature Visa card scored 618. JPMorgan Chase is the card's issuer, providing access to tens of millions of consumers that use the e-commerce giant. The bank has an extensive partnership with Amazon, supporting payment processing and other financial services technology for the e-commerce firm.